What kind and amount of dividends does P need

Assignment Help Taxation

Reference no: EM133039474

Question: John is a resident of Canada. John owns 100% of the shares of Packers Inc ("P"). P owns 40% of the shares of Seahawks Ltd ("S"). Both P and S are CCPCs.

In the current year, P earned the following income:

$100,000 - capital gain from the sale of public company shares

50,000 - interest from Canadian government bonds

12,000 - dividends received from a Canadian public company

8,000 - dividends received from S

--------------

$170,000

For the current year, the following information applies to S:

$1,000 - ERDTOH balance (before any dividend refund)

$6,665 - NERDTOH balance (before any dividend refund)

$20,000 - non-eligible dividends paid by S to its shareholders

$0 - opening GRIP balance for S

REQUIRED:

1) Calculate P''s combined (i.e. federal and provincial) taxes payable for the year. Assume a 12% provincial tax rate.

2) Calculate P''s ERDTOH and NERDTOH balances at the end of the year (assume opening balances of NIL).

3) P wants to get a full refund of its ERDTOH. What kind and amount of dividends does P need to pay to John in order to make this happen? If there are multiple possibilities, discuss them all.

4) P wants to get a full refund of its NERDTOH. What kind and amount of dividends does P need to pay to John in order to make this happen? If there are multiple possibilities, discuss them all.

5) P wants to get a full refund of both ERDTOH and NERDTOH, while John wants to pay the least amount of personal tax. What kind and amount of dividends does P need to pay to John in order to make this happen?

Reference no: EM133039474

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